Fortitude Gold: A High-Yielding Play In A Sector Not Known For Generous Dividends

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Mining stocks have not historically had a reputation for consistent dividends, due to the industry’s cyclical nature. That said, Fortitude Gold Corp. (FTCO), a small gold miner, has so far managed to maintain a strong dividend profile, observes Bob Ciura, contributing editor at Sure Dividend.

In addition to its monthly dividend payments, Fortitude Gold stock has a high yield of approximately 10.8%. As a result, it is a part of our annual High Dividend 50 series, in which we individually profile the 50 highest-yielding stocks in our database.

Fortitude Gold is a small gold mining firm that was separated from Gold Resource Corp. and turned into a public company in December 2021. The company operates in Nevada, a region well-known for being welcoming to the mining industry, and focuses on extracting high-grade gold using open pit heap leach methods.

A graph of growth in a gold mine  Description automatically generated with medium confidence

It owns six properties, all located within a 30-mile radius and situated in the productive Walker Lane Mineral Belt. It should be noted that their shares are traded in the OTC market, meaning that the stock is not listed on major stock exchanges.

On May 7, Fortitude posted its Q1 results. For the quarter, revenue came in at $8.2 million, 62% lower than last year. The decline in revenue was driven by a 65% drop in ounces of gold sold. However, a 19% increase in ounces of silver sold, combined with 10% higher gold and 2% higher silver prices, slightly offset this setback.

Fortitude Gold’s outlook has been clouded as it awaits permits from regulatory agencies to mine deeper in the Isabella Pearl deposit. Fortitude Gold is also waiting for permit approval to build its County Line project. Therefore, the stock is a high-risk, high-reward situation.

On one hand, rising gold prices and improved operating processes can significantly enhance the company’s financial performance amid higher profit margins. On the other hand, declining gold prices and rising expenses could negatively affect profitability.

Fortitude Gold’s edge in the industry lies in the expertise of its management team and its history of creating significant value for shareholders. Before the spin-off from Gold Resource, they had generated over $1 billion in revenue there, maintained profitability for ten consecutive years, and distributed over $116 million in dividends to shareholders.

Furthermore, Fortitude Gold’s properties have high-grade ore and surface deposits, which results in low-cost operations compared to their competitors. The company’s financial position is also quite strong, with $130.2 million in total assets against just $12.4 million in total liabilities, resulting in a strong equity value of $117.8 million.

Fortitude Gold’s dividend policy is to pay out as much cash to shareholders as soon as possible while still taking into account the need for capital for operations, reinvestment for growth, and taxes. Based on expected 2024 EPS of $0.55 and the current annualized dividend of $0.48 per share, Fortitude Gold has a 2024 dividend payout ratio of approximately 87%.

We consider Fortitude Gold’s recent payouts to be relatively secure. However, the dividend could be cut during a prolonged, unfavorable environment for the commodity producer.

My recommended action would be to consider buying shares of Fortitude Gold.

About the Author

Bob Ciura is currently senior vice president of Sure Dividend, and has been in that role since 2016. Previously, he was an independent equity analyst for a variety of investment services, including The Motley Fool and Seeking Alpha. Mr. Ciura has over five years of experience in financial modeling and equity valuation. He has a Bachelor's degree in finance from DePaul University, and an MBA from the University of Notre Dame.

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